Is Sedona, Arizona Good for Airbnb Investment?

To start an Airbnb in Sedona, Arizona, begin by researching the city's strict short-term rental regulations, as Sedona requires a Transient Lodging License and limits rentals to properties zoned for commercial use or those with existing grandfathered permits, with new permits rarely issued since 2018. Contact Sedona's Community Development Department at (928) 203-5080 to verify zoning eligibility and obtain required permits, including a business license, transient occupancy tax permit, and fire safety inspection. Find a property in approved zones like commercial areas or seek existing short-term rental properties for sale, as residential zones typically prohibit new STRs. Once secured, furnish the space with high-quality, durable furniture emphasizing Sedona's red rock aesthetic, including outdoor seating to showcase views, reliable Wi-Fi, and amenities like hiking gear storage. List your property on Airbnb and VRBO with professional photography highlighting red rock views and proximity to attractions like Bell Rock, Cathedral Rock, and uptown Sedona. Set competitive rates considering Sedona's premium market typically ranges $150-400+ per night depending on size and location. Manage the property by hiring local cleaning services familiar with STR turnovers, partnering with property management companies like RedAwning or Vacasa if needed, maintaining 24/7 guest communication, and ensuring compliance with Sedona's noise ordinances and occupancy limits while collecting and remitting the required transient occupancy taxes to both city and state authorities.

To identify profitable short-term rental properties in Sedona, Arizona, focus on locations within 5-10 minutes of major attractions like Bell Rock, Cathedral Rock, and Tlaquepaque Arts Village, prioritizing properties with red rock views, hiking trail access, and proximity to uptown Sedona's dining and shopping districts. Seek properties with 2-4 bedrooms, outdoor spaces like patios or decks, hot tubs, fireplaces, and parking for multiple vehicles, as these features command premium rates averaging $200-400 per night depending on size and amenities. Conduct pricing analysis using AirDNA and Mashvisor to track seasonal demand patterns, with peak rates during spring (March-May) and fall (September-November) when temperatures are ideal for outdoor activities, while summer months see slightly lower occupancy due to heat. Research competition by analyzing similar properties within a 3-mile radius, studying their pricing strategies, amenities, and guest reviews to identify market gaps and positioning opportunities. Utilize Sedona-specific resources including the Sedona Chamber of Commerce for tourism data, STR Analytics for local market performance, and consult with Sedona-based property management companies like RedAwning or Vacasa who understand local regulations, seasonal trends, and the city's transient occupancy tax requirements, while monitoring the city's STR permit availability as Sedona has implemented caps on new short-term rental licenses in certain residential areas.

To obtain an Airbnb/STR permit in Sedona, Arizona, you must first apply through the City of Sedona Planning Department located at 102 Roadrunner Drive, Sedona, AZ 86336, or online through their permitting portal. Required documents include a completed Short-Term Rental License application, proof of property ownership or lease agreement with owner consent, a site plan showing the property layout, parking plan demonstrating adequate off-street parking for guests, contact information for a local responsible party available 24/7, proof of liability insurance (minimum $1 million), and a good neighbor agreement acknowledging compliance with noise and occupancy limits. The application fee is approximately $500 with an annual renewal fee of $250. The process typically takes 4-6 weeks for review and approval. Sedona-specific requirements include maintaining occupancy limits based on bedrooms (maximum 2 guests per bedroom plus 2 additional), providing adequate parking (1 space per bedroom), ensuring the responsible party can respond to complaints within 30 minutes, displaying the permit number in all advertisements, and complying with the city's noise ordinance and dark sky lighting requirements. Properties must also meet all building and fire safety codes, and owners must collect and remit city transaction privilege tax of 3.5% plus state taxes.

Short-term rentals (STRs) are legal in Sedona, Arizona, but operate under strict regulations implemented by the city. As of 2023, Sedona requires all STR operators to obtain a business license and comply with zoning restrictions that limit STRs primarily to commercial and mixed-use zones, effectively prohibiting them in most residential neighborhoods. The city has implemented a cap on the total number of STR permits available and requires properties to meet specific safety standards, parking requirements, and noise ordinances. Recent changes include enhanced enforcement mechanisms and increased penalties for violations, with the city conducting regular inspections and responding to neighbor complaints. STR operators must also collect and remit city taxes, maintain liability insurance, and designate a local contact person available 24/7 for issues. The regulations were strengthened in recent years due to community concerns about housing availability and neighborhood character, making Sedona one of the more restrictive jurisdictions for short-term rentals in Arizona while still allowing the practice under controlled conditions.

The most lucrative Airbnb investment areas in Sedona, Arizona include West Sedona near the airport and Highway 89A corridor, which offers easy access for tourists while maintaining proximity to major red rock formations like Cathedral Rock and Bell Rock. The Uptown Sedona district along Highway 179 provides prime location advantages with walkable access to galleries, restaurants, and shopping at Tlaquepaque Arts Village, making it highly attractive to visitors seeking the quintessential Sedona experience. The Oak Creek Canyon area north of Sedona commands premium rates due to its stunning creek-side locations and cooler temperatures, particularly appealing during summer months when desert heat drives demand for water-adjacent accommodations. The Chapel of the Holy Cross vicinity offers spiritual tourism appeal, attracting visitors year-round for weddings, retreats, and religious pilgrimages. Village of Oak Creek (VOC) provides more affordable investment opportunities while still offering red rock views and access to hiking trails like Bell Rock and Courthouse Butte, appealing to budget-conscious families and outdoor enthusiasts. The Boynton Canyon area near Enchantment Resort attracts luxury travelers seeking high-end experiences and spa tourism, supporting higher nightly rates despite limited inventory opportunities.

Airbnb properties in Sedona, Arizona are subject to multiple lodging taxes including Arizona state Transaction Privilege Tax (TPT) at 5.6%, Coconino County bed tax at 3%, and Sedona city lodging tax at 6%, totaling approximately 14.6% in combined taxes. The Arizona TPT applies to gross rental income and must be remitted monthly to the Arizona Department of Revenue, while the county bed tax of 3% on gross receipts is collected by Coconino County and remitted quarterly. Sedona's 6% lodging tax applies to rentals under 30 consecutive days and is collected by the city with monthly remittance required for properties generating over $1,000 in monthly rental income. Airbnb typically collects and remits these taxes automatically for hosts through their platform since approximately 2017-2018, though hosts remain ultimately responsible for compliance and should verify collection through their host dashboard. Properties rented for 30 days or longer are generally exempt from lodging taxes but may still be subject to standard sales tax, and some exemptions may apply for certain government or charitable organization stays, though these are rare for typical Airbnb operations.

Starting an Airbnb in Sedona, Arizona requires significant upfront investment due to the area's premium real estate market. Property purchase costs average $800,000-$1,200,000 for a suitable vacation rental property, with median prices around $950,000 for a 2-3 bedroom home in desirable areas near red rock formations. Furnishing costs typically range $25,000-$40,000 for quality furniture, bedding, kitchen essentials, and décor that meets guest expectations in this luxury market. Initial setup expenses including professional photography, listing creation, and marketing materials cost approximately $2,000-$3,500. Permits and fees in Sedona include short-term rental permits ($500-$800), business licenses ($200-$400), and potential HOA approval processes. Insurance for short-term rentals runs $3,000-$5,000 annually, significantly higher than standard homeowner's policies. Utilities including electricity, water, gas, internet, and cable average $300-$500 monthly depending on property size and season. First six months operating costs encompass cleaning services ($150-$250 per turnover), maintenance reserves ($500-$1,000 monthly), property management if outsourced (20-30% of revenue), supplies and amenities ($200-$400 monthly), and marketing expenses ($300-$600 monthly). Total startup costs range from approximately $1,000,000-$1,300,000, making Sedona one of the more expensive markets for Airbnb investment due to high property values and premium guest expectations in this renowned tourist destination.

Airbnb properties in Sedona, Arizona demonstrate strong profitability potential with average nightly rates ranging from $150-400 depending on property type and location, generating annual revenues of $35,000-85,000 for well-positioned properties. Operating expenses typically include 25-30% for Airbnb fees and payment processing, $8,000-15,000 annually for property management, $3,000-6,000 for utilities, $2,000-4,000 for maintenance and supplies, plus property taxes averaging $4,000-8,000, resulting in net profit margins of 35-50% for successful operators. Key success factors include proximity to red rock formations and hiking trails, professional photography showcasing views, luxury amenities like hot tubs and fire pits, and maintaining super-host status through consistent 4.8+ ratings. Properties near Bell Rock, Cathedral Rock, and Tlaquepaque Arts Village command premium rates, with some luxury homes generating over $100,000 annually. Seasonality impacts profitability significantly, with peak months (March-May, September-November) achieving 80-90% occupancy at higher rates, while summer months see reduced demand due to extreme heat. Case studies from VRBO and AirDNA data indicate that 3-4 bedroom homes with red rock views in West Sedona achieve the highest ROI, often exceeding 15-20% annually when factoring in property appreciation alongside rental income.

Airbnb investments in Sedona, Arizona typically generate annual ROI of 12-18% with cash-on-cash returns ranging from 8-15%, driven by the city's strong tourism market with over 3 million visitors annually seeking red rock experiences and spiritual retreats. Properties in prime locations near Bell Rock, Cathedral Rock, or Uptown Sedona command average daily rates of $200-400, with occupancy rates of 65-75% year-round due to consistent demand from tourists, wellness seekers, and outdoor enthusiasts. Initial investment recovery typically occurs within 6-8 years, with luxury properties ($800K-1.5M) achieving higher returns of 15-20% annually, while mid-range properties ($400K-700K) generate more conservative 10-14% returns. The market benefits from Sedona's limited inventory due to strict zoning regulations and high barrier to entry, creating sustained demand that supports premium pricing, though investors should factor in seasonal fluctuations with peak performance during spring and fall months when weather conditions are optimal for outdoor activities and the tourism season reaches its zenith.

STRSearch is a leading national platform that specializes in identifying profitable short-term rental properties for investors, including in Sedona, Arizona. Local Sedona real estate agents who focus on investment properties include Red Rock Realty Group, Sedona Summit Realty, and Coldwell Banker Realty Sedona, with agents like Jennifer Young and Michael Kearns who understand the vacation rental market dynamics in the area. National services that help investors find Airbnb properties include Mashvisor, which provides rental property analytics, AirDNA for market data and revenue projections, and Awning for short-term rental investment guidance. Additional local services include Sedona Property Management Company and Red Rock Property Management, which offer insights into profitable rental areas, while national companies like Vacasa and RedAwning provide market analysis and property management services that can help identify lucrative investment opportunities. Real estate investment firms such as Roofstock and Arrived Homes also operate in the Sedona market, connecting investors with pre-vetted rental properties, and local mortgage brokers like Arizona Lending Specialists can provide financing specifically tailored for investment properties in Sedona's competitive vacation rental market.